Mortgage rates bounced off their low for the year last week. While the bounce reflects a relaxation of the uncertainties we’ve discussed, the broader trend for rates still is favorable.

First, let’s look at the reasons for the bounce.

– Congress kicked the can down the road on funding the government and the debt ceiling. While calling this a legislative success would be an insult to failure, it may allow Congress to focus on tax reform, which in a roundabout way pressures rates higher.

– Irma, while still a damaging storm wasn’t the disaster weather guys and gals were predicting last week. The storm’s damage undoubtedly will be counted in billions of dollars, but markets are breathing a sigh of relief that it wasn’t worse.

– North Korea surprisingly decided to celebrate Founder’s Day without fireworks. After the recent nuclear test, the world seemed convinced the Koreans would shoot another ICBM into the Pacific on Sat. When that didn’t occur, the world exhaled.

So, fear and uncertainty are waning. That leaves our focus for the moment on inflation and the Federal Reserve. We get the Consumer Price Index this week. While it’s not the Fed’s preferred measure of inflation, it’s got street cred. Expectations are the report will show a continued absence of inflationary pressures.

That may factor into the Fed’s decisions at its meeting next week. Analysts aren’t expecting a rate hike, but they do expect the Fed to announce a start date for reducing its balance sheet. Markets, however, will probably focus more on the after meeting statements. If the statements suggest a more cautious Fed, rates could improve. Alternatively, if the statements suggest full-steam-ahead, they could end our summer rate rally.